Tough Time for Automakers: Maruti Cuts Production of Petrol Cars

It was the month of May when Maruti Suzuki India Limited (MSIL) saw the worst sales figures after four months of consecutive growth. It had reported 4.99 per cent fall in total sales at 98,884 units.
This is mainly due to fall in sales of entry level hatch backs like Alto, A-Star, Wagon-R, Estilo and M800. So, in order to prevent inventories pulling up, the company has stopped production of it’s entry level petrol cars like Alto, M800, A-Star, Estilo and Omni.

Mr. Mayank Pareek, Managing Executive Officer (Marketing and Sales), MSIL, said: “Petrol car sales are very low in these days as the market sentiment is down … We do not believe in creating excess stock. So, we adjust our production accordingly”.

“Normally we have inventories for three weeks. However, for petrol models, it is now around four and a half weeks”, he also added.

According to sources, MSIL has stopped production lines of petrol cars on May 25 – 26 and June 2 at their Gurgaon facility while the Manesar facility was normally functional. The company had cut production of 8,000 – 8,500 units of petrol cars in these three days. The company’s volume-driven mini-segment cars, comprising the M800, A-Star, Alto and Wagon-R, fell by 29.03 per cent to 29,895 units during the month from 42,125 units in May 2011. MSIL has described the recent petrol price hike as “disaster” saying that it would further affect the growth of automobile industry.

Mr. Pareek says: “This will further increase the skew between petrol and diesel vehicle demand, which is already very wide. This will severely affect the sales of entry level cars, which are mainly petrol driven”.

In last fiscal the over-all petrol car segment declined by 16.2 per cent as the customer demand shifted towards diesel cars. Now in this fiscal, there will be more demand for diesel cars, especially after the recent steepest petrol price hike. However, MSIL is expecting that the over-all sales will grow by 10 per cent in this fiscal, primarily driven by diesel engine powered cars.